Money saving expert Martin Lewis has warned people not to cancel their direct debit for energy bills.
While it may seem like the best course of action is to cancel as many direct debits as possible and just pay for the energy you use as you go, Martin is urging people not to be too hasty.
Martin offered helpful advice this past Friday, 26 August on his YouTube channel, answering questions from viewers.
One viewer, Joanne, wondered if 'there is any mileage in cancelling direct debit payments when the bill comes in. So, it's not giving energy companies money regularly and upfront.'
To which Martin replied: "Now you will note earlier I said that the price cap for somebody on typical use on direct debit is £3,549 a year, but those who pay and receipt of bills is £3,764 a year. So, two hundred pounds a year more, and that's the big problem you pay more per unit rate of gas and electricity if you pay in receipt of bills."
He went on to explain why you shouldn't rush to make the switch from direct debit to paying when you receive a bill.
"However, the direct debit is based on the energy firm's estimate of what you'll use now. If it's estimating too high [and] you don't like it you will get a short-term cash flow gain from switching to paying in receipt of bills - that's just when they send you a bill, and you pay for it each time so you might pay less money in the short run from it.
VIDEO: The energy price cap is up 80% on 1 Oct and likely worse in January.— Martin Lewis (@MartinSLewis) August 26, 2022
This is my full practical briefing on what it means, how it works, and including a Q&A.
For subtitles and full video go to https://t.co/EhknU6IdpT pic.twitter.com/kJPOSLgGxJ
"However, over the longer run, because you're paying more for each unit of energy you use you will pay more in receipt of bills because if you overpay on direct debit you are entitled to that money back, in the long run, I hope that one makes sense."
So, essentially, while direct debit might look more expensive on paper in the long run you're getting more for your money than if you paid each time you got a bill.
If you've been affected by any of the issues in this story, you can find more information about where to get help from Turn2Us via their website
Featured Image Credit: PA Images/Volodymyr Kalyniuk/Alamy Stock Photo
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